Hi everyone. I’m looking to invest in rental property. I am currently an Estate Manager with free time mostly on Mondays and Tuesdays. I am starting to look at condos in my area. 2 bedrooms/ 2 baths unit selling for an average $100k.
Typical operating expenses of $7-8k per year. My question is: are Condo’s worth the trouble?
Will the HOA board allow you to use as a rental?
We have several condo's and we love it, it does have its drawbacks; i.e. the whole 100% vacancy rule but we have them in really good locations. Make sure you check with your HOA, most only allow a minimum of 1 year leases; which is what we prefer anyways. But we did look at purchasing a couple of units that were in HOA's that were restricted by an 80/20 rule. After research the units were not in the 20%, so we did not purchase. We have also had to fight off the HOA's we are in instituting and 80/20.
@Jennifer Osborne Helpful info! I am evaluating a condo with HOA in my area. Can you explain more about the 100% vacancy rule and the 80/20 rule? Thanks in advance!
The reason some people don't like sfh is because when you are in between renters its 100% vacant. Say with a 4-plex if you have someone move out you still have 3 units helping pay your expenses. So you just want to make sure you are on top of your renters and know when leases are coming up for renewal, build into your contracts as much notice to you as the law allows so you can get them on the market and re-rented before your tenant gets out.
The 80/20 rule in HOA's means that 80% of the units have to be sold for primary residences only and 20% to investors for rental use. So if an HOA has this and you try to buy a unit for rental use and they have already met their 20% you won't be able to rent it out. Its also restrictive when you go to sell it as it limits your target market. Really what you need to do is when you are looking at a unit is have your agent (assuming you are using one) as the listing agent if the HOA is restrictive on the condo's usage but also as term limits on rentals. Depending on your area (i.e. close to hospitals) sometimes there are traveling nurses and they only want 6 month leases but your HOA won't allow those. Now you could have a very creative lease and just have them sign a year lease with a option to get out. Speak to your lawyer. ;-)
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